India’s corporate governance framework has matured significantly since the 1990s liberalization, shifting from informal family-led practices to a structured, regulation-driven system that balances the interests of shareholders, management, and other stakeholders. The Companies Act, 2013, which replaced the outdated 1956 Act, serves as the foundation, mandating board composition, independent directors (IDs), audit committees, and disclosures for related-party transactions (RPTs).

Complementing this are SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, which enforce transparency for listed companies, while sector-specific regulators like the Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority (IRDAI) customize oversight for banks and insurers. With over 70% of listed firms still family-controlled, the framework blends traditional ownership with modern compliance demands.

Key milestones have shaped this evolution. The 1999 Kumar Mangalam Birla Committee introduced mandatory board committees and shareholder rights through Clause 49 of the listing agreement. The 2009 Satyam scandal, where founder Ramalinga Raju admitted to inflating profits by over Rs ,000 crore, exposed massive accounting fraud and accelerated the Companies Act, 2013. India’s endorsement of the revised G20/OECD Principles in 2023 integrated environmental, social, and governance (ESG) factors, aligning with global standards.

Mandatory requirements now include at least one-third independent directors, a woman director on boards, and corporate social responsibility (CSR) spending for profitable companies—features that distinguish India internationally. Enforcement is handled by the Ministry of Corporate Affairs (MCA) through the Serious Fraud Investigation Office (SFIO) and SEBI’s market surveillance tools, with penalties for non-compliance. Despite these measures, India’s stock market has grown at a 12% compound annual growth rate over the past 15 years, making robust governance essential for sustaining foreign investment.

However, significant loopholes undermine the framework’s effectiveness. Promoter dominance is a primary issue, with controlling shareholders—often families—holding over 50% stakes in most listed companies. This allows them to appoint compliant independent directors and approve opaque RPTs, exploiting exemptions for transactions in the “ordinary course of business.” High-profile cases illustrate the problem: the Adani Group faced a U.S. indictment for alleged $265 million bribes to secure contracts.

Independent directors, meant to provide impartial oversight, are frequently ineffective. Selected by promoters, many serve on 5–7 boards, diluting their attention, and board self-evaluations lack independent scrutiny. The 2018 ICICI Bank scandal, where whistleblower complaints against CEO Chanda Kochhar’s conflicts were ignored, highlighted IDs’ reluctance to challenge management, with convictions remaining rare at under 2%.

Disclosure inadequacies further weaken governance. While LODR mandates quarterly financials and ESG reporting via the Business Responsibility and Sustainability Reporting (BRSR) framework, many disclosures are superficial, focusing on compliance rather than impact. The DHFL scam, involving Rs 31,000 crore masked through fake accounts, exposed these flaws. Unlisted and rural firms face delayed MCA e-filings, and enforcement is hampered by resource constraints, as seen in the HNG Insolvency case, where a Rs 42 crore fraud lingered due to slow NCLT resolutions.

 Sectoral disparities increase vulnerabilities: public sector enterprises (PSEs) suffer from government interference and missing board diversity, banks struggle with non-performing assets (5–7%) post the PNB-Nirav Modi fraud of Rs 11,000 crore, and startups like Byju’s in 2024 prioritized growth over governance, leading to valuation collapses. Collectively, these gaps contribute to fraud losses estimated at 2–3% of GDP annually. Tightening the framework requires comprehensive reforms.

Prominent voices have shaped the discourse on critical occasions. In 2016, ousted Tata Sons chairman Cyrus Mistry warned, “Shareholder value gets lost when things are done illegally, when principles of corporate governance are not adhered to.” Infosys co-founder N.R. Narayana Murthy, in his 2003 committee report, stated, “Corporate governance is not just compliance; it’s the moral compass of business,” advocating auditor rotations that were later implemented post-Satyam. At the 2023 G20 Summit, Finance Minister Nirmala Sitharaman declared, “India’s governance framework ensures resilience,” linking it to ESG integration.

RBI Governor Shaktikanta Das, in the 2024 Trend and Progress report, emphasized, “Strengthening risk management in banks is non-negotiable for financial stability.” SEBI Chair Madhabi Puri Buch in 2024 pushed for “independent third-party board evaluations as a global practice India must embrace fully.” Philanthropist Rohini Nilekani said in 2022, “We cannot be mere consumers of good governance; we must be co-creators.” South Africa’s Mervyn King, architect of the King Reports, noted, “You cannot legislate good behavior; organizations need qualitative governance.”

As India pursues a $5 trillion economy amid AI disruptions and geopolitical tensions, corporate governance must transcend mere compliance to embody ethical capitalism. The Tata Group’s profit-with-purpose model offers inspiration, yet recurring scandals, such as Anil Ambani’s 2024 CBI raids, expose persistent frailties. The CLC’s push for e-adjudication and rising investor activism, like the ZEEL revolt, signal momentum. Tightening loopholes through regulatory rigor, technology, and cultural shifts will forge a framework that not only prevents fraud but powers sustainable prosperity, ensuring India’s corporate narrative inspires global confidence.